AEAweb: Journal Article Full-Text Access

Note to Institutional Subscribers: If you normally access AEAweb journal content via your university or firm's subscription and receive this page, please click here. The most likely causes of this are a recently changed IP address, a new subscription, or the renewal of a lapsed institutional subscription. This page will stop appearing on the next synchronisation of the document delivery and authentication systems.

You may also click here for pay-per-view, Athens login and other access options .

AEA Members, please click the button below to access the login form:

Arnold, Lutz G., and
John G. Riley. 2009. "On the Possibility of Credit Rationing in the Stiglitz-Weiss Model."
American Economic Review,
99(5): 2012-21.

Show Article Details

DOI: 10.1257/aer.99.5.2012

Abstract:Contrary to what is usually assumed, the expected revenue for lenders as a
function of the loan rate cannot be globally hump-shaped in the Stiglitz-Weiss
(1981) adverse selection model with a continuum of types. This has important
implications. First, if there is credit rationing, there must be at least two equilibrium
loan rates. Second, while at the low rate loans are rationed, all those
applicants willing to pay the high rate are then served. Numerical analysis
shows that unless the joint distribution of risk class and output is rather special,
the two loan rate outcome with rationing is unlikely. (JEL D82, G21)

FiveThirtyEight covered the ongoing debate over teacher evaluation, citing two companion papers that appeared together in the September 2014 issue of the American Economic Review. In "Measuring the Impacts of Teachers" I and II the authors construct "value-added" estimates for teachers in a large urban school district by observing how students' test scores change from year to year as they pass through each teacher's classroom. They find that their teacher value-added scores are not significantly biased and are potent predictors of students' later-life outcomes.

Wonkblog covered an article published this month in the American Economic Journal: Applied Economics. In Saving Lives at Birth: The Impact of Home Births on Infant Outcomes the authors study a sample of over 300,000 Dutch women and find that home birth increases the risk of newborn mortality, especially for low-income women, likely because of reduced access to medical technologies after delivery.

A Wall Street Journalanalysis of potential merger activity in the health insurance industry cited a study published in the American Economic Review. In "Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry," the authors found that a 1999 merger between two large U.S. health insurers drove up customer premiums and depressed doctors' earnings in certain parts of the country.